Competition in southeast Wisconsin's already fiercely contested grocery market promises to intensify after Kroger Co. decided to enter the fray with its acquisition of Milwaukee-based Roundy's Inc. — parent of Pick 'n Save, the region's market-share leader — in an $800 million deal announced Wednesday.

Roundy's stockholders are to receive $3.60 per share, a 65% premium over Tuesday's closing price. Cincinnati-based Kroger also will take on Roundy's $646 million in debt.

Kroger executives say they plan to invest in Roundy's existing stores in metro Milwaukee and intend to grow their sales in a grocery market considered by many to be among the most competitive in the United States. Pick 'n Save's market share has been slipping, but at 39% it still leads Milwaukee-area grocery retailers. Walmart is next at 18%, and no other single brand has more than 7%.

"The thing that we will be able to do over time is obviously we have more financial resources than Roundy's had, so we'll be able to invest in the market more aggressively, and over time the customer will see that," Rodney McMullen, Kroger's chairman and chief executive officer, said in an interview.

Roundy's headquarters will remain in Milwaukee and the business will continue to be run by "key members" of the senior management team, including Roundy's CEO Robert Mariano.

Kroger executives said they have no plans to close stores. As far as the possibility of dropping the Pick 'n Save brand name, "We would never make a decision that important on day one," McMullen said. Kroger has grown over the years with significant acquisitions of grocers and kept those brand names, McMullen said.

Roundy's successful Mariano's chain in the Chicago area is included in the deal. Roundy's also has a commissary in Kenosha and warehouse operations in Oconomowoc, which are expected to be part of the new company.

McMullen made it clear that Kroger intends to revitalize the Pick 'n Save brand, which has come under withering competition from local, regional and national players.

"There are a lot of great competitors in the markets we operate in," McMullen said. "When you look at Walmart and Meijer, we obviously compete against them in a lot of markets. In Wisconsin, you have Woodman's that does a fantastic job, and Sendik's is a very nice operator as well."

Kroger intends to vigorously compete in the market.

"We look at markets that we think are going to grow in total, and we always find that we are able to get our share of the growth," McMullen said. "We see lots of opportunity in Milwaukee. We really like the locations of the Pick 'n Save stores. We like the market share they have, and we see a lot of opportunity to continue to grow the business, and when you grow your business you are able to create a number of additional jobs."

Kroger as a company added 25,000 jobs last year and 20,000 jobs in the year before that, McMullen said.

Founded in Milwaukee in 1872, Roundy's employs more than 22,000 people and operates 151 supermarkets in Wisconsin and Illinois under the Pick 'n Save, Metro Market, Copps and Mariano's brands. The company posted 2014 sales of nearly $4 billion.

Founded in Cincinnati in 1883, Kroger is far larger, and with the acquisition will operate more than 2,700 supermarkets and employ more than 422,000 people in 35 states. Kroger reported sales of $108.5 billion in 2014.

Mike Schlotman, Kroger chief financial officer, said during a conference call with financial analysts that the company expects the agreement to close by the end of the year. Kroger and Roundy's have no overlapping territories in Wisconsin.

"We see significant potential for growth in Wisconsin and Illinois," Schlotman said during the call.

Kroger has no plans to reduce staff, a spokesman said. It has not cut any staff as a result of its acquisition last year of Harris Teeter Supermarkets Inc., operator of stores in the Southeast and mid-Atlantic, the spokesman said.

"The only change we made on Harris Teeter was lowering prices," McMullen said.

Kroger typically generates savings through measures such as the application of its purchasing power, executives and market analysts said. It will be able to invest in store locations, pricing and people, among other things, where Roundy's could not because of the level of debt it carried.

"That would be an accurate assessment," Mariano, the Roundy's CEO, said in an interview.

"It gives us the opportunity to reassert our position in Wisconsin," Mariano said, adding that it will also allow the company to continue to grow its Mariano's banner in Chicago.

Kroger's acquisition of Roundy's is good news for Wisconsin, given Roundy's financial position, said Burt Flickinger, managing director of Strategic Resource Group, a New York retail consultancy.

"This is the best early Christmas present that the vendors who depend on the company and the team members who work in the company could have," Flickinger said. "Kroger is the best-led retailer of any kind in the U.S. It can compete effectively in the range from Walmart to Whole Foods to Costco."

Roundy's said Wednesday that it lost $8.6 million during the third quarter while same-store sales — a key measure of retail performance — fell 3.4% compared with the same period a year ago. The same-store sales decline continues a pattern in which Roundy's market share erodes as competitors open across the region.

By contrast, Kroger reported a same-store sales increase of 5.3% in its second-quarter earnings report, the most recent the company has issued.

Look for Kroger's entry into the market to result in lower prices for consumers, said David Livingston, a grocery consultant based in Waukesha, who is forecasting prices could drop at Pick 'n Save stores by as much as 4% to 5%.

Livingston also said he believes Kroger will eventually close some Pick 'n Save stores.

"There's no way Kroger is going to continue to operate low-volume, redundant stores," he said. "They don't do that anywhere."

That said, even a perfect grocery retailer would be challenged in the region's market as it now stands, Fox said.

"They still face the same challenges we all face," he said. "We're in an over-stored market. You have way too much retail square footage chasing way too few retail dollars."

Kroger said it expects to realize $40 million in cost savings, over time, as part of the Roundy's acquisition, and it plans to reinvest the money to grow the business.

The acquisition fits into Kroger's growth strategy, McMullen said.

"When you put it on a map, it looks like a company that should have already been together," he said. "That's the thing that's so exciting. It fills in a great area of the country with geography that we weren't in before."

Breann Schossow of the Journal Sentinel staff contributed to this report.

Kroger Co.

■Operates 2,623 retail grocery stores in 34 states under nearly two dozen banners and formats that include supermarkets, price-impact warehouse stores and multidepartment stores, which are similar to supercenters.